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Recent FINRA Arbitration Decisions Critical of Excessive Attorney’s Fees

Forbes magazine recently reported that the Financial Industry Regulatory Authority (“FINRA”) slammed unreasonable attorney’s fees in two recent arbitration decisions. FINRA is a private financial regulation organization that offers arbitration services for its members. The Forbes article discusses two recent arbitration cases and their criticism of attorney’s fees.

In Merrill Lynch v. Oliver, the arbitrator ruled in favor of Merrill Lynch but cut attorney’s fees by 50% and denied any reimbursement for expenses. This was due to documentation failing to properly identify attorneys or describe with particularity the services that were performed. In Othello Capital v. Penson, the arbitrator ordered Penson to reimburse Othello $250,000 for money withdrawn from Othello’s brokerage account. The arbitrator determined this to be the unreasonable amount of attorney’s fees paid out of the account.

Forbes contributor, Bill Singer, comments that in the past FINRA arbitrators have paid little attention to the reasonableness of attorney’s fees. Singer, who worked for FINRA predecessor NASDA and frequently writes about the securities regulation, says that these cases are noteworthy because they may represent a trend in increased scrutiny of legal fees. Singer views this trend as commendable. Cases are cited in full below for further reference.
In The Matter Of The Arbitration Between: Claimant, Merrill Lynch, Pierce, Fenner & Smith Incorporated V. Respondent, Bryan C. Oliver (FINRA Arbitration 09-06564, July 28, 2011) 2011 WL 3471167.

In The Matter Of The Arbitration Between: Names Of Claimants, Othello Capital Partners LP And Othello Capital GP, LP V. Name Of Respondent, Penson Financial Services, Inc. Name Of Counter-Claimant, Penson Financial Service (FINRA Arbitration 08-03816, July 29, 2011) 2011 WL 3471156.

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